CNN effect is the term used to describe the negative effect on the economy caused by the public staying in to watch TV during a war, or similar crisis situation, rather than going out and spending their money. The phrase was coined during the first Gulf War after CNN pulled in huge viewing figures. Some claimed the slump in consumer spending in the days before the Gulf War was due to people crowding rounds their televisions, knowing that war could breakout literally any moment.

Viewing figures complied by Nielson Media Research, showed that 51million American homes (55% of homes with TVs) tuned in for the first night of the war, making it one of the biggest TV-watching events in US history.
Consumer spending makes up two thirds of the American gross domestic product so if the CNN effect in genuine the economy could slip into recession. Economists think this is unlikely though, pointing out that Americans watch an average of four hours TV in peacetime anyway. And that it doesn’t matter if they spend that time watching warfare or Big Brother. Plus, if the war goes well then the public will quickly turn their attention away from the conflict and go back into their normal routine.

Sources: www.money.cnn.com, www.theinquirer.net

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